To reform the EU, Britain must leave

Patrician vision versus plebeian pragmatism

by Brian Reading in London

Thu 3 Mar 2016

The European Union has been hijacked by ‘patricians’ – the elite, establishment, bureaucrats, multinationals and corporate interests. The ‘plebeians’ are rarely consulted. So the 23 June referendum on EU membership – whether or not it should end in ‘Brexit’ – represents a giant democratic breakthrough.

To plagiarise Churchill, a British departure from the EU is not the end or the beginning of the end. It is the end of the beginning. Prime Minister David Cameron’s effort to seek EU reform as a means of averting Brexit has failed. But Brexit could be the catalyst for reform. If not, the EU is doomed.

We will see the workings of these trends in the run-up to the poll. Adam Smith’s ‘invisible hand’ posited that the pursuit of self-interest could be to the common good. He assumed free markets (my over-simplification). But where markets are constrained by rules set by powerful special interests, and where democratic systems are politically flawed (see, for example, the US gun lobby), self-interest does not serve, but tends to subvert, the common good.

Indeed, self-interest may well decide the outcome on 23 June. Among those who wish to remain, few argue the case for the common good. Most equate a sectional interest with the general interest, as in ‘What’s good for GM is good for America’. The City of London is no exception. Virtually all big multinationals are against leaving – perhaps fearing higher UK taxes. Nowhere is the leap in the dark so prone to special pleading as on the issue of what happens after a feared or favoured British exit.

One point is crystal clear. The terms of continued EU membership have been marginally changed by pre-referendum negotiations. Britain has been offered minor exceptions, mostly meaningless. The EU remains unreformed. Post-Brexit terms are pure speculation. But so are future laws the EU could impose.

The 23 June poll is not simply a British referendum. The negotiations have tested whether other EU members want the UK to remain in. But theirs are patrician voices, who fear consulting their own plebs.

The patricians are impaled on the horns of a dilemma. Conceding meaningful EU reform is unthinkable. For the patricians to give the UK genuine ‘exceptional status’ would encourage similar demands by their own plebs. Membership then becomes ‘à la carte’, not the ‘table d’hôte’ that ever-closer union demands.

My father used to say, ‘Blessed is he who expects little, for he will not be disappointed.’ Cameron in his negotiations asked little. Even so, he has been largely disappointed. Brexit support may surge. If sustained, exit will follow. But then protracted negotiations of the new relationship will be blighted by the same dilemma.

If Britain leaves, Europe’s patricians would be tempted to treat the UK extremely poorly, ‘pour décourager les autres’. This tactic would surely backfire. Interdependence works both ways. Barriers to British exports would divert trade. Alternative supplies would cost more or be inferior, otherwise they would have been chosen in the first place.

Britain is already separated from the mainstream EU by its absence from the single currency and from Schengen. Divorce terms would need to be settled, hopefully amicably. Shared common interests suggest Brexit, well handled, would make little difference to the UK. The issue at stake is the EU’s future.

We will see a tussle between the visions of patricians and the pragmatism of plebeians. The patricians do not have a good track record, epitomised by the euro debacle. The EU has failed to deliver utopian expectations. It is understandable that everywhere the plebs are revolting.

Brexit could be the ex-post catalyst for EU reform. Some fear that, if the UK goes its own way, the EU could break up. Yet, if Britain stays, and there is no reform, the dominoes would fall faster. British exit provides the sole method of keeping them standing.

Brian Reading was an Economic Adviser to Prime Minister Edward Heath and is a member of OMFIF’s Advisory Board. This is No. 3 in the OMFIF series.